The use of Environmental Management Accounting (EMA) for identifying environmental costs

The Expert Working Group on “Improving the Role of Government in the Promotion of Environmental Management Accounting (EMA)” was set up by the United Nations Division for Sustainable Development (UN DSD) in cooperation with a number of government agencies and non-governmental experts to promote Environmental Management Accounting (EMA) through publications, pilot projects and by establishing an international forum for discussion on the role of governments in the promotion of EMA.EMA, Environmental management accounting represents a combined approach that provides for the transition of data from financial accounting, cost accounting and mass balances to increase material efficiency, reduce environmental impacts and risks and reduce costs of environmental protection. EMA is performed by private or public corporations, but not by nations and has a financial as well as a physical component.The core focus of environmental management accounting and of the EMA UN DSD methodology is assessment of total annual environmental expenditure on emission treatment, disposal, environmental protection and management. In addition, and that is new and challenging for most companies, the material purchase value of all non-product output and its production costs are added. This total sum often provides a frightening picture of total annual costs of inefficiency and gets companies to improve their information systems and material efficiency options, which is the goal in the light of cleaner production.The first book published by the Expert Working Group, Environmental Management Accounting—Procedures and Principles (Jasch, C., United Nations, New York, 2001), defines principles and procedures for EMA, with a focus on techniques for quantifying environmental expenditures or costs, as a basis for better controlling and benchmarking purposes. The methodology excludes costs external to the company (so-called externalities, e.g. environmental and social effects that occur to the general public), but focuses on comprehensive assessment of direct annual expenditure on emission treatment, environmental protection and management as well as wasted material and energy input (efficiency losses in production). Firstly, total annual expenditure is assessed, then improvement options, savings and investment projects as well as product prices can be (re-)calculated. The method is currently applied in several case studies. The following summary provides some of the core definitions and generic assessment tables.     

Environmental management accounting as a reflexive modernization strategy in cleaner production

Understanding the material purchase value of wastes and emissions and related processing costs is the essential contribution of an Environmental Management Accounting methodology proposed by a United Nations expert working group organised through the Division for Sustainable Development (UNDSD). Tracing costs and benefits according to this UNDSD methodology, considered as a “reflexive” modernization strategy in this article, sheds new light on cleaner production initiatives for corporate sustainability. Information on the first category of costs, waste and emission treatment, is generally the most accurate. Information on the second category, prevention and environmental management costs, is more difficult to determine because this category overlaps with, or is confused with, the first category of costs. Data for the two novel and innovative cost categories of the material purchase value of waste and emissions and related processing costs are even harder to obtain. Frequently, the costs are either hidden in overhead accounts or are not recorded because they are not required in conventional accounting systems. The outcome is that companies, even though they may profess otherwise, have very little knowledge about their full environmental costs, cost saving opportunities, or how best to achieve cleaner production initiatives to promote corporate sustainability. A more systematic application of the UNDSD EMA methodology would provide a better record of costs and act as a catalyst in promoting cleaner production processes. This application inevitably requires “reflexive institutions” including “reflexive corporations”, that is, corporations with the capacity to examine the side effects of their operations as modernization rebounds upon them.     

Environmental management accounting in Lithuania: exploratory study of current practices,opportunities and strategic intents

There is a growing consensus among the Lithuanian policy makers, practitioners and industrialists that environmental policy must move from a reactive stance to a more proactive, sustainable development approach. As a result, many companies are increasingly interested in the application of economic incentives at least as supplements or reinforcements of environmental standards.The Institute of Environmental Engineering (EU Centre of Excellence in Sustainable Industrial Development (APINI – SID)) in 1992–2003 has been involved in introduction and implementation of preventive environmental strategy in industry in Lithuania and in other countries. In Lithuania, these efforts resulted in the implementation of more than 200 cleaner production innovations in more than 150 Lithuanian companies. It should be stressed that effective plant maintenance is becoming a higher priority to plant managers. It is important to ensure cost-savings, at all levels, that include maximizing productivity and implementing energy-saving approaches. Effective and efficient maintenance are not just desirable, but fundamental to profitable business operations. Therefore, central to the environmental view of sustainable development is the concept that economic and social systems are sub-systems of the global environment.APINI's experience shows that decision-makers at the company level often fail to recognize the economic values of natural resources as assets as well as the business and financial value of good environmental performance. Therefore, there is a need to upgrade the business decision-making process by including information on material flows and related costs to account for efforts of sustainable development [Staniskis JK, Stasiskiene Z. Promotion of cleaner production investments: international experience. Journal of Cleaner Production 2002;11(6):619–28. ISSN: 0959-6526, Elsevier Science]. Decisions are increasingly affected by environmental costs. Application of environmental management accounting (EMA), which integrates two of the main principles of sustainable development – environment and economics, can help to significantly improve corporate decision-making.EMA is becoming increasingly important not only for environmental management decisions and development of environmental management systems (EMS), but also for all types of routine management activities, such as product and process design, cost allocation and control, capital budgeting, purchasing, product pricing and performance evaluation.Companies, which use EMA as a part of integrated management system, are provided with accurate and comprehensive information for the measurement and reporting of environmental performance.This paper investigates the current state of EMA practices in Lithuanian SMEs that have already been or are being implementing EMS and which have implemented CP innovations. In this case, EMA is analysed as an innovative assessment and evaluation method of EMS and CP innovation's environmental impacts and economic benefits. It should be stressed, that there are obvious differences in case studies from different industries. However, review of the results shows that there are many similarities in what improvements can be suggested for environmentally concerned companies both in terms of environmentally sound operation and for reporting of environmental management accounting information.     

Environmental costs at a Canadian paper mill: a case study of Environmental Management Accounting (EMA)

An Environmental Management Accounting (EMA) framework is applied to the 2000 year-end financial report for the Mackenzie Paper Division paper mill owned and operated by Abitibi-Consolidated Inc. of Montreal, Quebec. A conventional reading of the obvious environmental costs from this financial report is Cdn$2,196,838. This figure is derived from an analysis of effluent treatment costs and other line item environmental costs. There is no “environmental account” category that breaks out either costs or the mass balance of inputs and outputs. For the most part, environmental costs are rolled up into overhead accounts such as administration, infrastructure and materials accounts.Application of the EMA framework is based on assigning environmental costs to one of four categories for which a tentative breakdown is as follows: (1) waste and emission treatment costs ($3,348,902); (2) prevention and environmental management costs ($270,109); (3) material purchase value of non-product output costs ($946,799); and (4) processing costs of non-product output ($2 92,943). There is also a category called Environmental Revenues, of which none were reported. Conservative estimates thus place the total environmental costs at $4,858,753.What is significant about this result is that the environmental costs under EMA are at least twice as much as would normally be reported. This supports the view that environmental costs are much higher than generally considered and makes it clear that many important environmental costs as well as benefits are “hidden” in other accounts. More studies of a similar design are required to confirm the validity of the EMA methodology reported here.     

GE公司EHS绩效变化趋势与内部机制探讨

剖析通用电气Plan(政策/目标)-Do(运营体系)-Check&Act(检查改进)的EHS管理体系框架;通过综合指数法分析各环境、健康和安全绩效指标近年的变化趋势以及采取的管理措施;分析总结GE环境管理和环境质量绩效持续改进的机制与工具:(1)全球统一的EHS管理和运营体系;(2)自上而下的EHS培训与自下而上的沟通;(3)数字化的EHS管理工具;(4)严格的EHS审计保证机制;(5)强烈的企业公民责任意识和EHS文化,为国内企业建立和完善EHS管理和运营体系所借鉴。     

Development of a facility-based environmental performance indicator related to sustainable development

Companies are increasingly interested in environmental performance indicators as a means of managing the degree to which environmental goals and objectives are implemented. Many companies have publicly endorsed goals associated with sustainable development, like the International Chamber of Commerce's (ICC) principles for sustainable development. There is a need for metrics that facilitate implementation of these principles at the facility level and for research metrics that measure management improvement. An existing environmental self-assessment management tool called ESAP by the Global Environmental Management Initiative has been modified to measure a facility's response to the ICC's 16 principles of sustainability. The new tool's focus was shifted to a practical, facility based and easily applied assessment of progress towards sustainable development as represented by the ICC's 16 principles of sustainability. The new tool was called the Green Management Assessment Tool or GMAT, pilot tested and used in a research setting. Such tools have value to companies that are interested in the strategic goals of sustainable development and struggle with shifting corporate goals and objectives to manufacturing operations at the facility level.     

污染场地风险管控可持续评价指标体系构建及关键影响因素分析

以可持续发展理论和风险管理理念为基本原则的污染场地可持续风险管控已成为当前国际社会场地管理的重要决策问题和研究前沿热点,为明确影响污染场地风险管控可持续发展能力的决定性因素,基于国内外污染场地可持续风险管控相关文献的系统调研,构建契合我国场地管理背景的区域污染场地风险管控可持续评价体系,通过指标综合权重计算判定影响风险管控可持续发展能力的关键因子.结果表明,区域尺度上可能影响我国污染场地风险管控可持续性的指标多达44个,涵盖环境、社会、经济和技术这4个维度,单指标影响程度为0.26%～5.01%(平均值2.27%).潜在风险和温室气体排放(环境指标)、健康与安全和公众参与(社会指标)、管控成本和环保投资(经济指标)、修复周期和修复效果(技术指标)是影响我国污染场地风险管控可持续发展的重要因子,影响程度为1.89%～5.01%(平均值3.58%).具有较强政策敏感性的指标,包括考核指标、投融资创新、名录管理、能力建设、安全利用和制度建设等,对风险管控可持续性已经产生1.18%～3.48%的正向影响,随着政策制度的深入落实与全面地域推广,其对风险管控可持续发展的助力效应将更加明显.     

The environmental monitoring of large international companies. How and what is monitored and why

Monitoring is critical for environmental management. Environmental management decisions are dependent on monitoring; the same holds for reporting for legal purposes and reporting the environmental performance of the company. For improvement-based environmental management, an extensive monitoring system is needed. Such monitoring should be partly physical and partly financial. The core of physical monitoring should consist of materials accounting based on a mass balance of inputs and outputs of plants and measurements of releases. Financial monitoring should be focused on integrating all environmental costs into product costs. The aim of this survey is to find out how and what is actually monitored and why companies are conducting environmental monitoring. To address these issues investigations were carried out using structured interviews in seven large internationally operating companies. We found that legislation is the main reason for monitoring releases. The frequency of monitoring and which materials are monitored are also mainly dependent on legislation. None of the companies in our survey is using the extensive monitoring system needed for improvement-based environmental management. The financial part of the monitoring system was the least developed, but also the physical part showed many deficiencies. High uncertainties are possible in the results of monitoring. The companies studied have no comprehensive policy as to monitoring environmental costs and integrating these costs into product costs. The companies studied are monitoring environmental management system results infrequently. Accounting materials in order to determine a mass balance is not executed by the companies studied. Audits should be part of the monitoring program. All of the companies studied have regular audits. The audits are used mainly by most of the companies to control the working of the environmental management system.     

The Environmental Performance Strategy Map: an integrated LCA approach to support the strategic decision-making process

Life Cycle Assessment (LCA) is a well-known tool for analyzing environmental impacts on a wide perspective with reference to a product system and the related environmental and economic impacts. The need for a novel approach that complements environmental and financial considerations is addressed in this study with the introduction of a new graphical representation: the Environmental Performance Strategy Map. This graphical map allows one to combine the main environmental indicators (footprints) with the additional dimension of cost. The paper defines the Sustainable Environmental Performance Indicator as a single measure for sustainability of a given option. Comparison of different options for strategic decision-making purposes can be enhanced and facilitated by the use of this indicator.     

Environmental management accounting applications and eco-efficiency: case studies from Japan

This paper explores the links between environmental management accounting and measures of eco-efficiency in Japanese business. Environmental management accounting is a relatively new environmental management tool initially designed to trace and track environmental costs and physical environmental flows. In the paper, first, the recent development of environmental management accounting is considered; second, the links between environmental management accounting and eco-efficiency measurement are examined. Recent case studies in environmental management accounting from Japan are used as a basis for the analysis. It is concluded from the analysis that the practice of linking eco-efficiency measurement with environmental management accounting information is underutilised, diverse and in need of further promotion if EMA is to help Japanese business move production processes and consumption of its products towards sustainability.     

国内外石油公司HSE绩效指标及安全绩效比对

分析了国外6家知名石油公司和协会的HSE绩效指标,并与国内3大石油公司HSE绩效指标进行比对,发现国外石油公司HSE绩效指标基本一致,其中损失工作日事件、可记录事件、交通事故等指标是目前多数国内企业没有统计的安全绩效指标;温室气体排放、火炬燃烧气体、可挥发烃(VOCs)排放、泄漏等指标是国内企业没有统计的环境绩效指标。对比分析了6家国外石油公司和协会的安全绩效水平和趋势。     

How to perform an environmental management cost assessment in one day

The article provides definitions for environmental accounting and environmental management accounting based on the approach developed for the United Nations Division of Sustainable Development UN DSD/DESA. It presents the basic framework for assessing corporate environmental costs as well as materials flows (including energy and water) and their costs. The paper is based on experiences from applying the UN DSD EMA framework in company workshops and case studies mainly in Austria. It especially describes how to check for data consistency within different information systems, like the list of accounts, stock management, production planning and process engineering. Common hurdles for obtaining data from different information systems are described and solutions for improved consistency of data in an organization are presented. It provides a detailed example of an assessment in a brewery in the excel tool developed to assist in the application of the UN DSD EMA approach.     

Challenges in internal environmental management reporting in Argentina

This paper concentrates on the internal reporting methods applied to cleaner production and environmental management accounting programmes in Argentina. Questions on how environmental costs and benefits are defined, the mechanisms adopted to measure the continuing benefits arising from certain changes in management and processes and practical issues of data collection and collation are included. Furthermore, situations in which the ideally desired information is not immediately available from existing accounting or other information systems within the companies are also discussed. The success of communication initiatives, in particular, rests on both the environmental accounting messages and the ability of the users to understand the information. From this perspective, the worksheets included are considered to be an important tool to following the programmes and communicating the results. The integration of data through a set of indicators organised according to an environmentally balanced scorecard methodology may provide important information for decision-makers and add real value to sustainable development by helping people become conscious of sustainability-related matters. In addition, accountants need to know about the information improvements they can obtain using the EMA methodology.     

Transitioning to sustainable production – part II: evaluation of sustainable machining technologies

This paper presents a case-study that highlights the importance of sustainable machining technologies in achieving sustainable development objectives. A technology evaluation was undertaken to understand the likely impacts of the use of technology on sustainability performance measures. The evaluation is more than an experimental method for supporting the design of technology and an instrument for supporting decision-making. It is also a tool for supporting technology policy and for encouraging its adoption and application in industry. More specifically, a sustainability evaluation of cryogenic and high pressure jet-assisted machining in comparison to conventional machining is examined. Sustainability performance measures refer to environmental impact, energy consumption, safety, personal health, waste management, and cost. The case-study refers to the machining of high-temperature Ni-alloy (Inconel 718). It is shown that tooling costs represent the major contribution to the overall production cost, which contradicts previous analyses, and that sustainable machining alternatives offer a cost-effective route to improving economic, environmental, and social performance in comparison to conventional machining.     

A recursive ecological indicator system for the supply chain of a company

This paper proposes the concept of cumulative eco-intensity with which environmental or sustainability indicators are related to the added value of economic activities. The intensities are passed on recursively from supplier to supplier and thus make it possible to include upstream and downstream effects along the supply and waste disposal chain. The process is applied to whole companies and (by contrast with LCA) not to individual products. At comparatively low expenditure for the individual companies, it allows vertical comparisons along the value-adding chain and horizontal comparisons among companies or production locations. This provides a decision-making aid for a company seeking to fulfil its ecological or sustainability responsibility in the entire production and supply chains.     

Analyzing the carbon footprint from public services provided by counties

In this paper we investigate the Carbon Footprint (CF) resulting from the activities of the county of Sogn og Fjordane (SFK). An Environmentally Expanded Input-Output model is applied to develop a consumption-based Greenhouse Gas (GHG) inventory for this purpose. The model has previously been used for the assessment of municipal CFs, and is in this paper further developed for the purpose of assessing county CFs. Results show that a large fraction of the CF is caused by the purchase of services from private actors, especially the purchase of transportation services, of which a steady increase from the year 2002–2008, is found. In the same period of time, the CF resulting from the operation of county vehicles has been reduced to only 1/6. This outsourcing regarding the provision of services is found in several departments of the county municipality. It indicates a necessary shift in local mitigation strategies, as more focus needs to be on the environmental performance of suppliers. One important finding in the SFK case is the potential of introducing environmental requirements in tenders on providing transportation services. Another is to make environmental requirements to the companies receiving financial support from the county administration.     

Improving the environmental performance of the fishing fleet by use of Quality Function Deployment (QFD)

This article introduces Quality Function Deployment (QFD) as a method for improving the environmental performance of the Norwegian fishing fleet. Systems engineering has been introduced as a feasible process for handling sustainability issues in the fisheries, because it contains methods for general system design, operation, and support in a life-cycle perspective. QFD is related to systems engineering as a method for translating stakeholder needs into detailed system requirements at each life-cycle stage. Eco-QFD extends the scope of QFD, and combines QFD, Life-Cycle Cost (LCC), and Life-Cycle Analysis (LCA) to evaluate environmental effects and costs in the system development process. The article assesses the usefulness of Eco-QFD in fisheries management decision-making regarding sustainability in the fishing fleet, and for shipyards in their design of fishing vessels. It is concluded that Eco-QFD may be difficult to use for fisheries management in its present form, due to the complexity of sustainability, and the time and efforts demanded to carry out the analyses. Nevertheless, the structuring of the stakeholder needs and requirements may contribute to improved understanding of the decision-situation.     

The measurement of corporate environmental performance and its application to the analysis of efficiency in oil industry

This paper addresses a measurement of corporate environmental performance, and its application to the analysis of efficiency in the petroleum firms. In order to measure firms' environmental performance, we suggest a framework called “Gscore” that consists of five categories, namely general environmental management (GEM), input, process, output, and outcome. Gscore is a proxy measure of corporate environmental performance based on voluntary environment, health, and safety (EHS) report and is calculated by aggregating the points of the above five-categories. We apply our measurement framework to the data of 39 firms' voluntary EHS reports which are available on the internet. Ten of them, on which efficiency analysis was conducted with Gscore, assets, employee, and profits, are in petroleum and refining industry. According to our results: (1) a gap is found between rhetoric and practical environmental management stemming from calculating the relation between GEM and data part in 39 EHS reports. (2) On the whole, EHS reports of petroleum firms have something in common, but there are significant differences in the type and amounts of disclosed data among the EHS reports. (3) From the results of efficiency analysis, it is found that the number of employee exerts a considerable influence on determining the relative efficiency of petroleum firms, then Gscore, profits, and assets in sequence. Furthermore, Exxon, Ashland, Phillips Petroleum, and ARCO are shown to be efficient among 10 petroleum firms.     

Incorporating sustainability into supply management in the automotive industry – the case of the Volkswagen AG

Companies are perceived as important actors in the drive for sustainability. Linked to this, and in response to increasing demands from various stakeholder groups, companies start to look at their supply chain to enhance their overall sustainability profile. Two major triggers can be identified: (1) focal companies are held responsible for environmental and social problems caused by their suppliers, which become more and more important as (2) an increasing share of value is created at the supplier level. In response to such demands, companies have to find ways to incorporate environmental and social aspects into their supply (chain) management. Therefore, environmental and social standards are integrated into supply management by amending the purchasing processes. This paper presents one approach to integrate social and environmental standards into supply policy and supply management at the Volkswagen AG, a focal company of the automobile industry. Therefore, required changes of the sourcing and supply structures were identified during an action research project, and possible options adaptable for company internal integration are shown.     

An approach to assessing sustainability integration in strategic decision systems for product development

This article aims to explore a new approach to assess company decision systems regarding sustainability-related communication and decision support between senior management and product development levels. The assessment approach was developed in theory and its applicability was directly tested in action research in two small and medium-sized companies and two large companies. The results were validated against experiences made by two management consultancies. Our study indicates that successful companies should: (i) integrate sustainability into business goals and plans, backed up by suitable (ii) internal incentives and disincentives and (iii) decision support tools. Our study also indicates that the new assessment approach can be used as a template to assess the current state of sustainability integration in company decision systems.